UPDATE 1-NovaGold may sell Rock Creek, sees Donlin study soon

Reuters Staff

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(In U.S. dollars, unless noted)

TORONTO, April 15 (Reuters) - NovaGold (NG.TO) expects to release a feasibility study on its massive Donlin Creek gold project in Alaska by the end of April, and may sell its suspended Rock Creek mine in the state, the company said on Wednesday.

Donlin, a 50/50 joint venture with Barrick Gold (ABX.TO), is NovaGold’s main asset and could produce between 1 million and 1.5 million ounces of gold a year when production ramps up, NovaGold said.

It said a decision on construction decision would not be likely before 2012, and financing will have to be nailed down.

Vancouver, British Columbia-based NovaGold released the update as it reported a first-quarter loss of C$28.5 million ($23.6 million), or 20 Canadian cents a share. The company has struggled to stay solvent following a freeze-up of credit markets and troubles at Rock Creek.

The company suspended Rock Creek in November barely a month into operations due to mechanical problems, lower projected cash flow and difficulty meeting environmental requirements.

NovaGold said it will “maximize the value” of Rock Creek in 2009, and will consider options such as restarting the mine, bringing in an operating partner, or selling the mine.

“Whatever the decision, we expect Rock Creek to bring additional value to NovaGold shareholders in the near to medium term,” the company said.

However, it said it does not currently plan to restart Rock Creek.

NovaGold faced a cash crunch in December, but managed to refinance a $20 million bridge loan. It then won $60 million in financing from privately-held Electrum Strategic Resources, which is now NovaGold’s largest shareholder.

NovaGold said it has C$78.8 million in cash.

It has also had to deal with soaring project costs at its Galore Creek copper/gold project in British Columbia, a joint venture with Teck Cominco TCKb.TO.

NovaGold’s shares were down 5 Canadian cents at C$3.25 on the Toronto Stock Exchange.

$1=$1.21 Canadian
Reporting by Cameron French; editing by Janet Guttsman